How Can Car Finance Help Us Out Of Recession?

Thursday, 5. March 2009

It would seem that we are still waiting for some sort of bailout of the car finance sector in order to get people back into new cars but are the Government at risk of doing what they have done with banking and put the money in the hands of the wrong people. There are many lenders other than banks and they should have been helped before the banks who have simply bolstered up their balance sheets in preparation for the huge amounts of bad debt that they are about to walk into as a result of pulling the rug from beneath much of the small business community. The government is now about to provide funding to car manufacturers’ own finance arms as 53% of all vehicle finance is still arranged through dealerships but what about the non franchised dealers who are trying to sell used cars? Without finance used car sales will fall and the whole car recycle model falls apart. One also has to ask why most finance is arranged through dealerships? I’ll tell you why, it’s because of ignorance, people simply don’t understand the options. My next book on car finance will detail over 40 ways to finance a car and you have to be bonkers to enter into any form of car finance without first reading the book. You can pay substantial amounts more for your car than you need to by focusing only on APR. In my book I show two schemes whereby one of the schemes based on exactly the same cost of the car as another over the same period with a lower APR cost more in interest charges than the alternative. It is so frustrating to see people meander aimlessly into finance deals that are going to cost them hundreds if not thousands of pounds more than they need to. I spoke to one customer recently who had arranged finance through a dealer believing the agreement to be a Personal Contract Purchase when in fact it was a Conditional Sale Agreement with a balloon. Basically he had to pay the final balloon at a huge loss to him rather than simply hand the car back. His response was, ‘I was a bit annoyed with myself that I hadn’t looked more closely at the agreement.’ WHAT???? It was a clear case of miss-selling and if it was me the salesman would now be permanently wearing a Ford Focus up his bottom along with a Ford KA (new model) in his ear for good measure. The problem is that people don’t fight because they don’t fully understand their legal position. The industry isn’t regulated in the same way as the insurance industry is so there is no single body such as the FSA that you can complain to. Brokers and dealers are not obliged to provide best advice to customers so the advice they give often benefits just them and not their customers. So consider very carefully whose advice you are going to take before changing your car next and if you can hang on wait for my new eBook and make sure you end up with the Real Deal. By Graham Hill